Opportunity is missed by most people because it is dressed in overalls and looks like work.

Thomas A. Edison

We all have to eat, right? Well, maybe you can make many of those meals tax deductions and put those pre-tax dollars to work!

One common misconception is that all those meal receipts with prospects, clients, employees, etc. are 100% tax deductible. Unfortunately, this is isn't the case. So here is a short and sweet breakdown on which meal expenses should be recorded in your bookkeeping at 100% and which should be recorded at 50%. Your tax pro will thank you and as a result, their fee may reflect that…. Hopefully.

Deductible Amounts

Dining with Staff = 50% Deductible

Office Meals and Food = 50% Deductible

Dining when Traveling = 50% Deductible (you have to be away overnight and outside of your normal commute)

Dining with a Prospect, Client, Vendor, etc. = 50% Deductible

Company Parties / Events / Presentations / COGS = 100% Deductible

Beverages with Clients, Prospects, Employees, Workers, Vendors, etc. = 50% Deductible

Opportunities for Deductions

"Friend Meals" to "Business Meals"

Rather than dining with those we used to call "friend(s)" use these situations to talk a little business, ask for referrals, chat business opportunities and marketing ideas over meals and beverages. Let's loose the term "friend" and transform it to "sources of business."

Meals and Drinks - Solo

If you stop to get a coffee on your normal work commute, this is not a business expense. It can be, if you plan each of these stops to be a business meeting with a client, colleague, etc. or even an overnight business trip, then it is.

Entertainment and Memberships

Since 2018, entertainment expenses are no longer tax deductible, but if you can break out the meal expense from the entertainment cost, then you can record the meal. One example of this could be a country club membership. The membership isn't deductible, but the meal and drink portion is if it is in fact used for business purposes.

Examples

 Meals w/ Prospects

Meals w/ Employees

Meals w/ Workers

Meals w/ Vendors

Employee Team Meals

Year-End Parties

Office Cafeteria

Meals at Hotel

Meals at Work Outings

Meals at Horse Shows for Business

Drinks at Shows and Events for Business

Bookkeeping Implementation

The purpose of this article is to help you understand general guidelines on how the IRS allows various business meal expenses to be tax deductible and to show why it's important to keep detailed bookkeeping records of these transactions.

Recommendations

1. Keep any and ALL receipts and backup documentation

2. Write as much detail as possible on the actual receipt (with who, for what purpose, where, etc.)

3. Create Multiple accounts in your bookkeeping records:

Meal - 50% Deductible

Meal - 100% Deductible

Important Note

Not all businesses are created equal and what may be deductible for one business, may not for another. Please refer to your own tax preparer for specifics and how you can benefit from meal deductions for your specific business operations.